The Two Tales of Trend Followers

What is really driving CTA returns?

One of the key arguments and most often cited explanation for the rise in popularity of beta investment products has been investors’ reluctance to pay the higher fee structure typically charged by active managers. Although time will tell whether this migration towards beta fund investing is prudent, it certainly raises further questions about the current investment landscape. Many investors may be disgruntled not only because of underperformance relative to fee structures, but also because of a lack of transparency tools and possibly manager failure at successfully demonstrating exposures and expectancies of when a strategy should out-perform or under-perform and why.

The trend following industry has seen an influx of beta offerings. Whilst the downwards pressure on fee structure is arguably very good for investors, it may come at a significant cost as investors opt for low cost investment options that have performed exceptionally well during recent market crises, but may not offer investors sufficient insight into the attribution of that performance - thus leading to potential skewed risk exposures for investors.

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